US stock market futures retreated on Thursday, with the Dow Jones, Nasdaq 100, and the S&P 500 falling by over 0.50%. Other global indices like the German DAX, French CAC 40, and British FTSE 100 also retreated.
Dow Jones, S&P 500, and Nasdaq 100 are Falling as Odds of Trump Attack on Iran Rise
The main reason why the US stock market is falling today is the rising odds that the US will attack Iran.
In a statement, the White House said that Iran should be wise to make a deal as the military build-up gained steam. According to the Financial Times, the ongoing build-up is the biggest one since 2003, when the US invaded Iraq.
Data on Polymarket shows that the odds of an attack happening this month have jumped to over 80%.
An attack on Iran will have a major impact on the financial market. For one, it will lead to higher crude oil prices, which will lead to higher inflation in the coming months.
Indeed, data shows that Brent and West Texas Intermediate (WTI) continued rising, reaching the important resistance level at $70 for the first time in over a week.
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Federal Reserve Warned of Potential Interest Rate Hikes
The other main reason why the Dow Jones, S&P 500, and the Nasdaq 100 indices are falling is that minutes of the last monetary policy meeting, which were published on Wednesday, showed division among policymakers.
Some officials supported hiking interest rates later this year if inflation remains above the 2% target for longer than expected. A US attack on Iran may help to push prices higher in the long term
Still, most investors believe that the Federal Reserve will not hike interest rates this year, as a recent report showed that the headline Consumer Price Index (CPI) dropped from 2.7% in December to 2.4% in January. In a note, Mizuho analysts said:
“A prolonged, US‑led operation aimed at regime change would likely have a far larger and more persistent impact on energy markets, challenging the disinflation narrative and pushing curves to potentially reassess medium‑term inflation risk.”
Blue Owl and Private Credit Concerns
The other major reason why the Nasdaq 100, Dow Jones, and the S&P 500 Index are falling is the ongoing jitters in private credit, which holds trillions of dollars in assets.
In a statement, Blue Owl, a top company in the industry, announced that it was permanently halting redemptions at a private credit fund aimed at retail investors. This is a major announcement as the company had promised to reopen the redemptions this quarter.
Blue Owl troubles are worrying because it is one of the biggest companies in the industry with over $307 billion in assets under management (AUM). Also, investors are worried about the quality of loans issued by companies in the private credit sector after a series of blow-ups last year.
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